Avoiding the Avalanche

In this report, Sandbag finds that the European Commission’s proposal to tackle the oversupply of 2 billion allowances in the EU carbon market, could take a decade to get supply below current levels.

It finds that that previous forecasts published by the Commission and the UK government, underestimated the extent to which unassigned carbon allowances will hit the market in 2020. Sandbag estimates, roughly 750 million unused allowances will be auctioned in 2020, adding to 900 million “backloaded” allowances that are already due to flood the market in 2019 and 2020. This will see an acute increase in the supply just before the Commission’s proposed market stability reserve is supposed to start reducing it.

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